Shumway v. Horizon Credit Corp.

matter of law.13 For procedural both the reasons,

and evidentiary therefore, we de- cline to render or direct the rendition of any partial summary judgment in favor of the Teachers.

We judgments reverse the of the trial appeals, and court of and remand the cause to the trial court.

Gene A. SHUMWAY and Sandra

Shumway, Petitioners,

HORIZON CREDIT CORPORATION, Respondent.

No. C-8669. Supreme Court of Texas.

Jan. response 13. rehearing, prior year’s to the motion for budget and the attendant Teachers admit that the factual statement in our facts and circumstances. Whilе the trustees’ prior opinion expressly adopted that the trustees testimony and board records be self-serv- prior year’s salary August schedule at the ing, they at least raise fact issues that the Rather, meeting, 1985 board was incorrect. salary adopted by estop- schedule was not either "implied" Teachers assert that it is that the trust- pel or ratification. adopted salary adoption ees schedule from

OPINION

HECHT, Justice. The whether question presented contractually note promissory makers of presentment, notice rights to waived their intent to of the note holder’s balance and notice of acceleration The trial due on the note default. summary judgment for the court rendered holder, appeals court af- and the hold that the 768 S.W.2d 387. We firmed. presentment and notice of makers waived acceleration, but not Accordingly, we reverse the accelerate. and re- court the trial for fur- mand the cause to proceedings. ther Shumway Gene and Sandra borrowed Corporation to money from Horizon Credit signed buy Shumways The a sailboat. to Horizon of fif- monthly period over installments repaid, the loan was years. teen Before The damaged an accident. the boat was damage Shumways considered past their insurer did not. repair, but arose, the Shum- Shortly dispute after this monthly ways stopped paying their install- Horizon, in breach of their obli- ments gations the note.1 later, acceler- months Horizon Several note and payments ated due unpaid Shumways for entire sued the interest.2 Horizon moved for plus balance supported by its affi- summary judgment, stating ‍​‌​​​‌​​​​‌‌‌‌‌​​‌‌‌​‌​‌​​‌​‌​‌‌‌​​​‌‌‌‌​‌​‌‌‌‌​‍it had its davit “exercised rights in with the written accordance Hоuston, Catlett, petition- Debra Jo agreement note] [i.ethe ers. remaining Promissory Note and declare all owing.” Hancock, payments due and The Mary Leyh, Lou Patricia Ann responded look to their Houston, that Horizon should respondent. outstanding princi- Shumways’ OF 2. Horizon claimed that note stated: "RISK LOSS. February Damage, through pal plus destruction or loss of Vessel interest earned you.” my obligations 137,777.77. will not release me from plainly obliged to continue were monthly making to Horizon destroyed completely whether merely boat was damaged. insurer Thus, because the boat was the note. the sole issue us is before granted total loss. The trial court Hori- whether waived such zon’s motion. under the terms of the note. appeals,

In the court the Shumways summary contended that the conclusively did record establish their II note, liability due, the the amount Under the Texas Uniform Commer proper by demand and acceleration Hori- (UCC),3 upon cial Code a demand the maker rejected zon. The all their promissory pay of a note to is the note majority contentions. The of the court 3.504(a).4 presentment. called UCC Or § Shumways held that expressly the had dinarily, require present the does not UCC demand, waived notice of intent to acceler- primari ment of a note maker or other to ate, by and notice of acceleration the fol- ly party. liable See UCC 3.501. How §

lowing provision the in note: ever, presentment to the is maker of a note ENTIRE BALANCE DUE. If I default required before the note holder can exer Note, you under may require this that optional right cise an time to accelerate the unpaid the entire balance of the Amount any payment due on Ogden the note. plus of Loan accrued interest and late Ass’n, 232, v. Gibraltar 640 S.W.2d Sav. charges paid prior be at once without (Tex.1982); Allen Sales & Servicenter notice or demand. 863, Ryan, 525 S.W.2d 253, Futch, Faulk v. 147 Tex. 214 S.W.2d dissented, justice 768 S.W.2d at 388. One 614, The note holder must arguing language that this waived demand notify both of to the maker his intent acceleration, but not notice of the Ogden, accelerate and of acceleration. intent to aсcelerate. 768 S.W.2d at 389-91. Sales, 233; Allen 525 S.W.2d Court, ‍​‌​​​‌​​​​‌‌‌‌‌​​‌‌‌​‌​‌​​‌​‌​‌‌‌​​​‌‌‌‌​‌​‌‌‌‌​‍Now the before this 865; Faulk, at 214 S.W.2d at 616-17. longer dispute they in that were default of note, obligations their the notice can that the Presentment and be waived. 3.511(b)(1) liability amount of was by established UCC section states: “Present summary protest the judgment evidence. Horizon ment or notice or as the case dispute does not it neither is when be entirely party that made de- be excused to im paymеnt pri- charged expressly mand has it waived acceleration, gave plication nor either before or after it is due_”5 1854, early re notice of its intent or its As as and as of, 1982, cently recognized Court due under as this has gives 3. All of the UCC Law force in Texas effect references to sections are Instruments in stipulations waiving presentment, protest or those sections of the Texas Business and Com- dishonor, body merсe notice of instrument, contained in the Code. binding provides that are parties on all to it." acceptance 4. "Presentment is a demand for maker, payment acceptor, upon the made recently Legislature restricted waiv- payor or on drawee or other behalf of the presentment and cir- ers of notice in certain holder." cumstances: Notwithstanding any agreement con- tо the long 5. This has been rule in Texas. The trary, the of a debt shall serve a debtor 3.511(b)(1) predecessor to UCC section sec- in default under deed of trust or other Negotiable tion property 82 of Uniform Instruments real contract lien on used as (NIA), Act Texas in 1919. 1919 enacted in Tex. debtor’s with written notice cer- residence stating Gen.Laws 200. Section 82 stated ch. tified mail the debtor is in default part: dispensed in "Presentment under the deеd trust or contract. presentment, [b]y express given days with ... waiver or debtor at least 20 cure must be implied." Referring provision, the entire the Unit- the default before debt is due given. Supreme ed States Court stated Sowell v. sale is 51.002(d), January Tex.Prop.Code Federal Reserve 268 U.S. effective § 45 S.Ct. 528, 530, (1925): Negotiable "The 69 L.Ed. 1041 1988. Ogden, unequivocal. can parties to note waive Sydnor v. an to accelerate Gasc at 234. and notice. Given nor oigne, Ogden, 640 an (1854); obligation can neither be created 11 Tex. except clear and un stated: terms Court exercised waiver of the equivocal, it follows that a waiver, Thus, absence of right to of the intent exercise delinquent holder of a installment un be effective cannot present pay- demand exacting equally standards. less meets past due installments ment of right If the to notice could waived exercising his accelerate. terms, purpose of the rule re general added). Id. (emphasis Texas courts of creating provisions quiring precision in consistently followed this significantly would be option to accelerate rule.6 therefore, hold, that a waiv impaired. We previously We have not stated presentment, notice intent to accel er of of how of specific definite оr a waiver erate, notice acceleration is effective and of presentment and must be to ef be only unequivocal. if it is clear and if and that, rule, as a fective. We have held standard, a waiver To meet provisions must clear and sepa Ramo, specifically and provision must state English, Inc. v. unequivocal. 500 rately rights of In 461, surrendered. Waiver Motor & 5.W.2d 466 386, “presentment”, “no Corp. Hughes, dus. Fin. v. “demand” 302 S.W.2d acсeleration”, just so meaning in an tice” or “notice of 394 If the of a term words, present many is effective to waive open acceleration clause is to reasonable See, e.g., doubt, it should be construed avoid accel ment and notice of acceleration. Bacci, Ramo, Exchange, v. Inc Real Estate 500 466. The 676 eration. S.W.2d at 440, option (Tex.App. accelerating harshness оf the 441 S.W.2d [1st — Houston (holder 1984, writ) maturity obligation no “shall have the requires of an extended Dist.] or notice reading option both a strict terms of the without demand immediately the debtor. Brown v. maker ... option and to declare this note Bank, Hewitt, v. Avenue due”); 653 Slivka Swiss (Tex.Civ.App 143 S.W.2d 223 . —Gal 1983, ref'd), 939, 1940, (Tex.App. cited veston writ S.W.2d 940-41 — Dallas trust, accord, Sales, 233; writ) (under Allen 640 at deed of entire debt S.W.2d no “shall, Noteholder, option of the principle 525 S.W.2d at 866. This same payable once due without requires that notice of intent to accel become at Etheridge, v. notice”); Whalen and notice of be clear demand or erate 1984, 805, following opinions recognize (Tex.App. Corpus Christi no 6. The all 809 — waived; Bank, presentment writ); and notice can be do v. 653 S.W.2d Slivka Swiss Avenue however, not, uniformly 1983, 939, writ); reach what would be (Tex.App. no Cha- 941 — Dallas holding today. the correct rеsult under our Herbster, 594, (Tex.App.— 601 pa v. S.W.2d 653 Lesikar, Corp. v. 777 Texas S.W.2d Patterson, 1983, writ); Airfinance Tyler Valley v. 614 no 559, 1989, (Tex.App. [14th 563 Dist.] 867, — Houston (Tex.Civ.App. Corpus 872 Christi S.W.2d — Levine, 814, writ); v. no Stricklin 750 S.W.2d 1981, writ); Hano Burnett v. no Manufacturer’s 1988, dism'd); (Tex.App. writ Mer 815 — Dallas 755, Co., (Tex.Civ.App. S.W.2d 759 ver Trust 593 693, Bludworth, (Tex.App. cer 715 S.W.2d 699 v. 1979, n.r.e.); v. Fol ref'd Purnell —Dallas writ 1986, n.r.e.); ref'd —Houston writ [1st Dist.] 761, ien, (Tex.Civ.App.— S.W.2d 765-66 555 Co., 707 Hammond v. All Wheel Drive S.W.2d 1977, writ); Sylvester v. Houston no [14th Dist.] 734, 1986, writ); (Tex.App. no 736 — Beaumont 827, Watkins, (Tex.Civ.App. 538 S.W.2d 832-33 Co., 656, Cruce v. Eureka Ins. 696 S.W.2d Life n.r.e.); 1976, writ refd Whalen v. —Amarillo 1985, n.r.e.); (Tex.App. writ ref'd 657 — Dallas 824, (Tex.Civ.App. Etheridge, 428 S.W.2d 827-28 Oldsmobile, Inc., v. Villa 695 S.W.2d Baldazo 1968, n.r.e.); Phillips writ v. —San Antonio ref'd ‍​‌​​​‌​​​​‌‌‌‌‌​​‌‌‌​‌​‌​​‌​‌​‌‌‌​​​‌‌‌‌​‌​‌‌‌‌​‍1985, writ); 815, (Tex.App. no 817 — Amarillo 350, Whiteside, (Tex.Civ.App.— 426 S.W.2d 351 88, Inc., Emfinger Pumpco, v. S.W.2d 90 690 writ); 1968, no Interstate [14th Dist.] Houston 1985, writ); (Tex.App. no Es Real — Beaumont 913, Turner, 916 Co. v. 371 S.W.2d Bacci, 440, Ins. Exchange, tate Inc. v. 676 S.W.2d Life n.r.e). 1963, 1984, (Tex.Civ.App. writ); writ ref'd (Tex.App. no Dist.] [1st — Waco — Houston v. Brownsville Nat'l 664 S.W.2d Cortez (waiver 428 S.W.2d 827 (Tex.Civ.App. “demand or notice” deed of — San n.r.e.) (holder “demand, Antonio writ rеf’d trust and waiver of payment, pro declare entire “immediately non-payment, due and test, protest” in note notice,” held and maker sufficient waive notice of accel demand, notice, grace, present “waives Bludworth, erate); Mercer v. 715 S.W.2d ment for Phillips protest”); (notice at 698-99 of intent to accelerate not Whiteside, v. (Tex.Civ. required provided option since note writ) App. no [14th Dist.] — Houston accelerate “without demand or notice” and (holder shall have the “without de provided deed of trust for acceleration mand notice to the maker” acceler “with or without notice Party”); to First maturity, ate waived notice and Inc., Emfinger Pumpco, presentation payment). Likewise, (notice of intent to accelerate held waiver of “notice intent to accelerate” is providing “[fjailure waived clause See, e.g., right. effective to waive that exercise this [to accelerate] Valley Patterson, any default shall not constitute a waiver of ( Tex.Civ.App. Corpus Christi — it in exercise the event of writ) (notice of intent to accelerate is default”); Real Estate Ex subsequent waived when specifically states that Bacci, v. change (holder 676 S.W.2d at 441 “expressly notices, maker waives аll de legal duty notify was “under no to [the payment, presentations mands for pay for accelerate”; of its to intention maker] ment, notices of intention to accelerate the provided for to accelerate “without maturity[,] protest protest”); and of notice demand notice” and contained waiver of Turner, Interstate Ins. Co. v. 371 Life “grace, protest, presentation notice and for (Tex.Civ.App. S.W.2d 916 — Waco v. Cortez Brownsville Nat’l payment”); (same n.r.e.) writ ref 'd language result on Bank, (waiver 664 S.W.2d at 809 of “No However, in Valley). identical tice, Payment, Presentment Demand waiver of “notice” “notice of acceler Payment Maturity, and Acceleration of ation” does not waive notice of intent and Protest” held sufficient to waive notice accelerate, separate right.7 accеlerate); Slivka v. Swiss of intent Bodiford Parker, v. (Tex.App.— (waiver Avenue 339 653 S.W.2d at 941 1983, writ) (broad “demand, presentment Fort Worth of language and notice” held may, —“the entire sufficient to waive notice of intent to accel indebtedness ... at the Herbster, erate); Chapa v. 653 S.W.2d at option of Beneficiary, ... immedi (broad language providing 601 for acceler ately matured and become and due of Payee ation “at any without demand notice and of charac hereof, presentment without or de ter” —held insufficient to waive notice of Maker”, any mand or notice to the accelerate). intent “notice” Waiver of “demand, waiving presentment for pay “any “all even notice” notice whatsoev ment, nonpayment, protest, of notice notice er”, specificity, without more does not un protest of and аll other notice” held suffi equivocally convey that the borrower in notice). required cient to waive all tended to waive notice both of acceleration accelerate, sepa intent two Ill rights. disapprove rate We cases that contrary E.g., results. agreed The Shumways reached that Horizon Levine, v. Stricklin payment could accelerate of their indebted- “notice”, referring sрecifi- provision provision of Waiver or the waiver mak- cally right either to of notice notice of er otherwise has the to notice of intent to accelerate, accelerate, intent to is waive sufficient to notice in addition to notice of acceleration. "notice", words, only many of acceleration because the waiver relates to the of Waiver so dоes clearly unequivocally of It note. is not suffi- not refer either to types cient waive notice of intent intent notice of or to both because it is not clear from the acceleration notice. ment, to accelerate notice of intent prior “without notice or demand”. ness language is void as This effective to waive of acceleration notice and notice acceleration. unenforceable. public policy and therefore However, did because harsh- long recognized has This court agree specifically to acceleration without remedy of acceleration and of the ness accelerate, they did not imposing mitigate by its effects sought to separate right unequivocally waive this requirements the hold- equitable several quoted. language The ineffectiveness of a note. Allen Sales er not from general language of the derives Servicenter, Ryan, 525 v. S.W.2d Inc. commendable, simplicity, is but its which Corp. Fin. Motor & Indus. vagueness. its 276, 302 157 Tex. S.W.2d Hughes, First, make a the holder must establishing gave either Without install- overdue demand for of its intent to accel- This Ryan, S.W.2d at 866. ment. debt, erate their or that avoid a requirement seeks to forfeiture notice, enti- waived that Horizon was not allowing the to cure the default ‍​‌​​​‌​​​​‌‌‌‌‌​​‌‌‌​‌​‌​​‌​‌​‌‌‌​​​‌‌‌‌​‌​‌‌‌‌​‍Accordingly, summary judgment. tled to to the holder’s acceleration we reverse the court Second, give a holder clear appeals and remand to the trial court note. Id. proceedings unequivocal further consistent with notice of intent to acceler- opinion. Ass’n, 640 Sav. Ogden ate. Gibraltar (Tex.1982). This oppor- the maker an required to allow

Concurring opinion Justice MAUZY. explicit- It cure must tunity tо the default. in MAUZY, to cure result Justice, concurring. ly state that failure will possibility and the of a deficien- foreclosure addressing enforceability general In Third, the holder cy judgment. Id. provisions, of waiver the court overreaches. it unequivocal give clear and Neither the nor Horizon Credit in fact accelerated debt. The Corporation ever raised this issue. at 234. only question presented by the parties wаs provision’s specific whether this waiver requiring the holder The reasons for Therefore, language was sufficient. are steps prior these to acceleration take enforceability general court’s discussion of notes, one Many promissory like the clear. dicta. have for a is mere I would waited issue, provision” “default contain a parties case in which the raised themselves de- triggering thе maker’s lists the events issue; however, since the insists may the note fault. now, I reaching separately.1 I write any these occurrence of one of upon the only agree I concur because with events, may be though even the maker judgment reversing remanding court’s or the occur- unaware of its occurrence the case. beyond the control.2 maker’s rence Further, lending practices over сommercial I hold waiver would that the contractual (1) that: pay- years, generally have revealed of the maker’s to demand for future; (3) any or mis- opinion originally or I have made false drafted Justice 1. This leading your application; Spears departure credit his from the statement in Franklin insolvent; (4) agree unemployed or position he I or Because I with the or (5) become court. took, adopted substantially keep Vessel as re- his concur- I do not insured I have mortgage my ship or quired any preferred as own. rence die; (7) (6) security agreement; or I I other provides maker in case that the pay- 2. The note bankruptcy or similar relief from file for if: bankruptcy is in default my ing file debts or creditors due; puts you a against other than (1) me or someone any payment don’t when make Vessel; (8) than other (2) any liеn on someone promise in or in made this Note break enough my you puts a any preferred ship mortgage lien on income or related or other ability my my property security agreement to interfere with effective or in the now “boilerplate” implied warranty, yet lender alone drafts the warranty allowed the note; (2) rarely protection terms of the be disclaimed and its eliminat makers read merely pre-printed ed standard form do, provision, they waiver if even unintelligible or an merger disclaimer significance do not legal understand its clause.” Id. it; power are change delete (3) attempt “shop a maker’s around” rights pay- maker’s to demand for terms is compet- better futile because ment, of intent to accelerate and ing offer substantially lenders the same notice rights of accelerаtion valuable are (SECOND) terms. RESTATEMENT protect that this court should from skillful (1981) OF CONTRACTS comment b § routinely drafters who waivers insert Rakoff, Adhesion: Contracts An rights into pre-printed these forms. If we Reconstruction, Essay Harv.L.Rev. waited for lenders of this world to (1983). 1179 n. 21 provide rights forms, these the bargaining for borrowers achieve Equity always demands that powers negotiate terms, eq- these these meaningful opportunity to cure simply not rights uitable would exist. The рermitted default before a holder is to ac- ignores reality. opinion court’s Borrowers note, collateral, repossess celerate the equal bargaining posi- do not stand bring sell it at a foreclosure sale and suit tion pretending with their lenders. deficiency judg- the maker for a they do, the court its traditional abdicates places ment. hold To otherwise this court guardian equitable function thesе as enforcing position of contract that rights. “no in his man senses and under delu- hand, sion would make on one honest and fair man would ac-

[which] cept on the other.” Earl of Chesterfield Janssen, 125, 155, Eng.Rep. Ves.Sen. reasoning court’s enforceabili ty provisions of waiver conflicts with the reasoning decisions which have openly attempted been hostile toward waiv important rights. ers of We held that an ATHARI, M.D., Petitioner, M. еxculpatory provision exempting a landlord liability negligence from was void as public policy unequal due to the Opal Margaret E. HUTCHESON

bargaining positions parties. Remy, Respondents. Cro Housing City well Authority Dal No. C-9211. (Tex.1973). las, 495 More recently, created common-law Texas. Supreme Court of warranty implied good and workmanlike Jan. repair we not be held could waived or Melody Mfg. disclaimed. Home Co. v.

Barnes, (Tex.1987). stated, incongruous

As would if we “[i]t public policy required the creation of an Note; (9) guar- ‍​‌​​​‌​​​​‌‌‌‌‌​​‌‌‌​‌​‌​​‌​‌​‌‌‌​​​‌‌‌‌​‌​‌‌‌‌​‍was not a transferred to someone who to make under the signed; (12) Note

value the Vessel decreases other than antor of this when it was tear; norma] (10) anything happens you good through faith wear and I inter- else of, may impair fere with the federal documentation with reasonable cause believe Vessel; pay perform ship mortgage my ability preferred on the or otherwise (11) my corporation shares are this Note. am

Case Details

Case Name: Shumway v. Horizon Credit Corp.

Court Name: Texas Supreme Court

Date Published: Jan 16, 1991

Citation: 801 S.W.2d 890

Docket Number: C-8669

Court Abbreviation: Tex.